The first scheme is a scheme proposed by seven professors from the Hong Kong University of Science and Technology to establish a dollar liquidity mechanism. The main points are as follows: Commercial banks can borrow US dollars from HKMA for one week, three months, six months and one year as collateral, and they can repay the principal and interest in US dollars or Hong Kong dollars at maturity (the exchange rate is 1: 7.8).
Under the current system, when speculators attack the Hong Kong dollar in the foreign exchange market, the supply of Hong Kong dollar will become tight, and the interbank interest rate in Hong Kong will rise sharply, which will affect the normal operation of the economy. After the introduction of the dollar liquidity mechanism, when the interbank interest rate of Hong Kong dollars is high, driven by market interests, commercial banks will first borrow dollars from HKMA, then sell dollars in the Hong Kong dollar foreign exchange market to buy Hong Kong dollars, and then lend Hong Kong dollars to banks to ease the demand for Hong Kong dollars, thus lowering interbank interest rates.
At present, banks are reluctant to sell dollars to buy Hong Kong dollars, because if the linked exchange rate system collapses and the Hong Kong dollar depreciates sharply, holding a large amount of Hong Kong dollars in their hands will incur huge losses. Therefore, to be on the safe side, banks would rather give up arbitrage opportunities. After introducing this mechanism, commercial banks can get put options granted by HKMA when they borrow dollars from HKMA. Loans can be repaid in US dollars or Hong Kong dollars at a fixed exchange rate. Therefore, commercial banks need not be afraid of the depreciation of the Hong Kong dollar at this time, but can boldly enter the market to stabilize the exchange rate of the Hong Kong dollar.
Professor HKUST believes that this plan will not increase the overall supply of Hong Kong dollars, and there is no need to use the US dollar reserves of HKMA. HKMA is just a middleman. Specifically, if speculators want to borrow HK$ 7.8 billion, banks can borrow US$ 654.38 billion from HKMA first. With this US$ 654.38+0 billion as collateral, banks can print an extra HK$ 7.8 billion to lend to speculators, and the interest rate in the lending market is stable. Where does HKMA's10 billion dollars come from? Borrow at market interest rate on eurodollar market. After borrowing Hong Kong dollars, speculators demanded that Hong Kong dollars be converted into US dollars. The financial system has increased by 1 billion dollars, which is a precaution. Speculators must have no chance. Finally, due to the maturity of the debt, speculators have to repay Hong Kong dollars, and they have to exchange their US dollars for Hong Kong dollars to repay the bank. In this way, the bank will exchange dollars and then recover the Hong Kong dollars repaid by the speculators. In this plan, HKMA and the bank are only intermediaries. HKMA encourages banks to borrow dollars from the international market to obtain Hong Kong dollars, thus "assisting" speculators to borrow in the international market and "activating" the relevant markets in Hong Kong. This mechanism can solve the problems of insufficient liquidity and high interest rate of Hong Kong dollar in time. As a result, local interbank interest rates have become more stable, closely following the US dollar interest rate in the international market. Hong Kong will no longer have to bear the pain of high interest rates to defend the linked exchange rate system. When speculators attack the Hong Kong dollar exchange rate again, they can no longer make interest rates soar, nor can they make profits in the forward Hong Kong dollar exchange rate and futures market. On the contrary, they have to pay related handling fees and loan interest.
HKUST's professor called the above scheme "the Great Move of Gankun" (in Jin Yong's language), which means to transfer the pressure of speculators to other places (international markets). There is another cause of this scheme, that is, dollarization of Hong Kong dollars. HKMA should tell the public that it would rather use foreign exchange reserves to recover all the Hong Kong dollars and realize dollarization of the Hong Kong dollars than give up the linked exchange rate, so as to realize the real move.
Mr Joseph Yam, Chief Executive of HKMA, thinks that the schemes of several HKUST professors are not feasible. Banks borrow cheap dollars through HKMA, then sell dollars to buy Hong Kong dollars, and then provide Hong Kong dollars to the interbank market; If speculators have a strong dollar, they will continue to buy cheap Hong Kong dollars and double their attacks on the Hong Kong dollar exchange rate. HKMA's dollar reserves are always limited, and the European dollars it can borrow are always limited. Therefore, the ultimate problem is confidence.
The second option is the modern currency board system proposed by Professor Zeng Yuji of Baptist University. This project is also called AEL project (AEL is the abbreviation of Argentina, Estonia and Lithuania).
The basic framework of modern currency board system is to establish a currency board, issue and redeem paper money according to 100% reserve, and commercial banks must open reserve accounts in the currency board. The currency board ensures that the reserves of commercial banks in the currency board can be freely exchanged at a fixed exchange rate. In other words, the currency board guarantees the free convertibility of the base currency (cash in circulation plus commercial banks' reserves in the currency board). In this way, the arbitrage between the Hong Kong dollar and the US dollar can be directly carried out between the currency board (central bank) and commercial banks, without carrying cash. If the linked exchange rate is 1 USD, it is HK$ 7.8. Bank A deviated from this exchange rate and used the new exchange rate 1:8. At this time, Bank B can sell one million dollars to Bank A to get eight million Hong Kong dollars, and then deposit the eight million Hong Kong dollars in the currency board to get 1.026 million dollars (according to 1:7.8). In this way, Bank B immediately made a profit of $26,000, and all these transactions could be completed in 20 seconds without carrying cash. Therefore, under the new system, banks have no incentive to deviate from the linked exchange rate. At present, the Hong Kong Monetary Authority has a positive (unofficial) evaluation of this plan.
The key of Professor Zeng's modern currency board scheme is that arbitrage activities do not need to carry cash, thus saving the transaction cost of arbitrage and accelerating the response speed of banks to market exchange rate fluctuations. Although the current linked exchange rate system in Hong Kong is not a real currency board, it is very close to the modern currency board system. Therefore, Professor Zeng's proposal has very limited improvement on the existing linked exchange rate system in Hong Kong.
It should be pointed out that under this scheme, the bank's 5% reserve in the central bank is difficult for small banks; Moreover, the reserves do not earn interest, but only increase taxes in disguise, which increases the operating costs of banks and weakens Hong Kong's comparative advantage as an international financial center.
In addition, although the modern currency board can form a monolithic linked exchange rate (the experience of Argentina, Estonia and Lithuania has proved this point), this fixed exchange rate has realized the pressure transfer of 100%, which has caused a great burden to other aspects of the economy. Therefore, the modern currency board cannot guarantee that the economy will not decline or the unemployment rate will not rise. Its function is like a gate, but it transfers the external influence on the linked exchange rate to other areas of the economy. In fact, love and the establishment of the Three Kingdoms are now having a hard time.
Saying that we must stick to the linked exchange rate in the near future does not mean that we must stick to it forever. Under the condition of fixed exchange rate, it is costly and painful to complete economic adjustment by adjusting the price level. Perhaps the most ideal situation is that after the financial crisis, after work on a sultry Friday (or the second day of the New Year's Day), when everyone is on holiday, HKMA suddenly announced that it would change the linked exchange rate to a floating exchange rate.
4. Adjust the Hong Kong economy on the premise of adhering to the linked exchange rate system.
Hong Kong's economy must be adjusted. Hong Kong is no longer a shopper's paradise. Hong Kong has become too expensive. During the period of 1983- 1996, the average inflation rate in Hong Kong was 7.79%, while that in the United States was only 3.55%, and the exchange rate between the Hong Kong dollar and the US dollar remained unchanged. In this way, the real appreciation of the Hong Kong dollar is very large.